A BUDGET A N A L Y S I S FOR A Y 2020-21 From the desk of - B.L. Tulsian Advocate R. Tulsian & Co LLP Chartered Accountants www.rtulsian.com
Page2 Contents Amendment of Section 16... 3 Amendment to Section 23... 3 Amendment to Section 24... 3 Insertion of proviso to Section 54... 4 Amendment to Section 80IBA... 4 Amendment to Section 87A... 4 Amendment to Section 194A... 5 Amendment to Section 194I... 5 Income Tax Slabs for A.Y. 2020-21:... 6 Rates of Surcharge:... 7 Disclaimer: The views expressed by the Firm are based on reading of the Finance Bill 2019 and on analysis of the relevant provisions of the Act. The firm does not accept any liability incurred by any person based on this circular. This is meant for Internal Circulation only and is for educational purposes and shall not be construed as professional advice.
Page3 The Interim Budget, 2019 was presented by CA Piyush Goyal, on 1st February, 2019. The key highlights are as follows: Amendment of Section 16 The Interim Budget 2019, has amended Section 16 of the Income Tax Act, 1961 so as to allow extra benefit to the Salaried class. The "Standard Deduction" has been increased from Rs. 40,000/- to Rs. 50,000/-. Amendment to Section 23 The Interim Budget 2019, has amended Sub Section 4 of Section 23 of the Income Tax Act, 1961 so as to allow extra benefit to persons owning 2 Residential house properties by exempting "Notional Rent" for the Second House. Thus, if a person has 2 Residential house properties, the owner shall not pay any tax on notional rent for the second residential property. Sub Section 5 of Section 23 of the Income Tax Act, 1961 has also been amended to exempt the persons for two years from inclusion of notional rent as income where they have houses held as stock in trade. Earlier the exemption was only for one year from the end of completion of the financial year when the completion certificate from appropriate authority was received. Amendment to Section 24 The Interim Budget 2019, has amended Sub Section 4 of Section 23 of the Income Tax Act, 1961, and has brought consequential Amendment to Section 24 of the Income Tax Act, 1961 so as to allow deduction for 2 house properties as per Section 23. Thus, now the total standard deduction and the Interest on borrowed fund u/s 24 shall include "aggregate deductions for 2 house properties" as specified in Section 23.
Page4 Insertion of proviso to Section 54 The Interim Budget 2019, has inserted a new proviso in sub-section 1, after clause (ii) to Section 54 of the Income Tax Act, 1961, so as to allow benefit of Capital Gains for Purchase/ Construction of two residential houses in India. Thus, if a person earns Long term Capital Gains on sale of any land or building and such amount does not exceed Rs. 2 crores, then the assessee has the option to purchase/construct 2 residential houses in India within the specified period. Further as per the speech of the Finance Minister, this option shall be available once in a lifetime to any assessee. Amendment to Section 80IBA The Interim Budget 2019, has amended Section 80IBA of the Income Tax Act, 1961 so as to extend the benefits for an additional year. Thus, for persons in the business of developing and building housing projects, the benefit of this section shall be extended till 31st day of March, 2020. Amendment to Section 87A The Interim Budget 2019, has amended Section 87A of the Income Tax Act, 1961 so as to extend the relief to small and middle class tax payers. The relief has been increased from erst while Rs. 2,500/- to Rs. 12,500/- for people whose Total Income does not exceed Rs. 5 lakhs. Thus, effectively, assessee with taxable income upto Rs. 5,00,000/- will pay NIL tax as compared to earlier Rs. 12,500/-.
Page5 Amendment to Section 194A The Interim Budget 2019, has amended Section 194A(3) of the Income Tax Act, 1961 to allow further savings in Interests earned from various bank/ P.O. deposits for the year without bearing TDS. The exemption limit for section 194A (3) has been increased from erst while Rs. 10,000/- to Rs. 40,000/-. Thus, for Individuals deriving income from any Bank deposits or Post office deposits, the TDS shall be applicable only if the Total Interest payout exceeds Rs. 40,000/- in a Financial Year. Amendment to Section 194I The Interim Budget 2019, has amended Section 194I of the Income Tax Act, 1961, to allow persons earning rental income from House Properties an additional relief of Rs. 60,000/- by way of non deduction of tax. Thus, TDS shall now be applicable only if Rent Payouts for the year exceeds Rs. 2,40,000/- from the erstwhile Rs. 1,80,000/-.
Page6 Income Tax Slabs for A.Y. 2020-21: 1) In case of every Individual, HUF, AOP, BOI whether incorporated or not, or every artificial juridical person: where the total income does not exceed ` 2,50,000 Nil where the total income exceeds ` 2,50,000 but does not exceed ` 5,00,000 (Note: Full rebate of tax u/s 87A is allowable on income upto Rs. 5 Lakhs) 5% where the total income exceeds ` 5,00,000 but does not exceed ` 10,00,000 ` 12,500/- plus 20% where the total income exceeds ` 10,00,000 ` 1,12,500/- plus 30% 2) In case of an individual, whose age is more than 60 years but less than 80 years: where the total income does not exceed ` 3,00,000 Nil where the total income exceeds ` 3,00,000 but does not exceed ` 5,00,000 5% where the total income exceeds ` 5,00,000 but does not exceed ` 10,00,000 ` 10,000/- plus 20% where the total income exceeds ` 10,00,000 ` 1,10,000/- plus 30% 3) In case of an individual, whose age is more than 80 years: where the total income does not exceed ` 5,00,000 Nil where the total income exceeds ` 5,00,000 but does not exceed ` 10,00,000 20% where the total income exceeds ` 10,00,000 ` 1,00,000/- plus 30% 4) In case of Firms including LLP s: On any or whole of income earned by it 30% 5) In case of Domestic Companies: Where the total turnover or gross receipts for PY does not exceed ` 250 crores 25% Where the total turnover or gross receipts for PY exceeds ` 250 crores 30%
Page7 6) In case of Companies other than Domestic Companies: Where the total income consists of Royalties and Fees for rendering technical services and scheme is approved by Central Government 50% In case of any Other Income 40% Rates of Surcharge: 1) In case of every Individual, HUF, AOP, BOI whether incorporated or not, or every artificial juridical person: Rates of Surcharge Total Income exceeding ` 50,00,000/- but not exceeding ` 1,00,00,000/- 10% Total Income exceeding ` 1,00,00,000/- 15% 2) In case of Firms including LLP s: Rates of Surcharge Where the total income exceeds ` 1,00,00,000/- 12% 3) In case of Domestic Companies: Rates of Surcharge Total Income exceeding ` 1,00,00,000/- but not exceeding ` 10,00,00,000/- 7% Total Income exceeding ` 10,00,00,000/- 12% 4) In case of Companies other than Domestic Companies: Rates of Surcharge Total Income exceeding ` 1,00,00,000/- but not exceeding ` 10,00,00,000/- 2% Total Income exceeding ` 10,00,00,000/- 5%
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